The Illegality of Digital Services Taxes Under EU Law: Size Matters

31 Pages Posted: 14 Nov 2018

See all articles by Ruth Mason

Ruth Mason

University of Virginia School of Law

Leopoldo Parada

University of Turin - Department of Management; International Bureau for Fiscal Documentation (IBFD)

Date Written: November 6, 2018

Abstract

This Article uses the example of company-size classifications to explore the role of disproportionate impact and legislative intent in judicial review of Member State laws for nationality discrimination. Our discussion of disproportionate impact is mostly descriptive—we explore how the Court has resolved questions of quantum and proof in the cases. Our discussion of intent is mostly normative—we argue, contrary to current doctrine, that courts should consider the legislature’s intentions as probative, but not dispositive, of discrimination.

We chose company size for two reasons. First, discussion of company size as covert nationality discrimination is new to the literature. Second, Member States increasingly use company-size classifications in tax laws; Poland and Hungary recently used turnover (as opposed to net income) to determine tax rates; and Spain proposes to use turnover to establish liability for its new digital services tax.

To illustrate how the Court of Justice might apply our approach to size discrimination, we consider whether the company-size thresholds in Spain’s and the EU’s recent proposals for a digital services tax constitute covert nationality discrimination. More generally, cooperative negotiations at the OECD towards reform that would appropriately tax the modern, digital economy must account for limitations imposed by EU law, and in particular its prohibition on nationality discrimination.

Keywords: digital services tax, DST, digital tax, EU law, digital PE, permanent establishment, tech tax, web tax, google tax

JEL Classification: K34

Suggested Citation

Mason, Ruth and Parada, Leopoldo, The Illegality of Digital Services Taxes Under EU Law: Size Matters (November 6, 2018). Virginia Law and Economics Research Paper No. 2018-16. Available at SSRN: https://ssrn.com/abstract=3279639

Ruth Mason (Contact Author)

University of Virginia School of Law ( email )

580 Massie Road
Charlottesville, VA 22903
United States

Leopoldo Parada

University of Turin - Department of Management ( email )

C.so Unione Sovietica, 218 bis
Turin, Turin 10100
Italy

HOME PAGE: http://www.buss-man.unito.it/do/docenti.pl/Alias?leopoldoeduardo.paradapino#profilo

International Bureau for Fiscal Documentation (IBFD) ( email )

Rietlandpark 301
Amsterdam, 1011 DW
Netherlands

HOME PAGE: http://www.ibfd.org/IBFD-Profiles/Leopoldo-Parada

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